AUD/USD rose 0.25% on Tuesday to about 0.7185, after holding support near 0.7150 in the European session. Recent trading has stayed in a tight range, with small candles reflecting limited direction after the Reserve Bank of Australia (RBA) decision.
The RBA lifted the cash rate by 25 basis points from 4.10% to 4.35% on Tuesday. The statement referred to persistent inflation pressures, stronger private demand growth, and renewed capacity pressures, while keeping future moves data-dependent.
Upcoming Data And External Demand
Australian trade data is due on Thursday, with Chinese trade figures due over the weekend. These releases are the next scheduled indicators for external demand conditions.
On the US side, Oil prices remained high as the Strait of Hormuz closure entered a third month, and talks did not produce a ceasefire timeline. The ISM Services PMI was 53.6, while JOLTS job openings were 6.87M.
Markets also await Friday’s US Nonfarm Payrolls, with consensus at 60K after the prior 178K. On the 15-minute chart, AUD/USD was 0.7184, above the daily open at 0.7169, with Stochastic RSI at 9.49.
On the daily chart, AUD/USD traded at 0.7184, above the 50-day EMA at 0.7066 and the 200-day EMA at 0.6823. Daily Stochastic RSI was near 50.8.
Late 2025 Technical And Policy Backdrop
Looking back at the situation in late 2025, we recall the Reserve Bank of Australia hiking its cash rate to 4.35%, which set a bullish tone for the AUD/USD. The pair was trading around 0.7185, holding firmly above its key moving averages, signaling a strong underlying uptrend. That period was marked by indecision as we awaited confirmation from incoming data.
Since that time, the policy divergence between Australia and the US has become much clearer, pushing the pair higher. We have seen Australian inflation remain sticky, with the Q1 2026 CPI print coming in at 3.8%, well above the RBA’s target band. In response, the RBA has hiked twice more, bringing the cash rate to its current 4.85% as the domestic labor market remains tight with unemployment at just 4.1%.
Conversely, the US dollar has weakened as the Federal Reserve began a shallow cutting cycle earlier this year, a move anticipated by the soft jobs data we saw in late 2025. US inflation has cooled more convincingly, with the latest reading for April 2026 at 2.5%, giving the Fed room to ease policy. This growing interest rate differential in favor of the Aussie dollar has been the primary driver of the pair’s strength.
Given this sustained trend, traders should consider using options to maintain upside exposure while managing risk in the weeks ahead. Buying AUD/USD call options or implementing bull call spreads could be effective strategies to capitalize on further strength if the policy divergence continues. We saw a similar dynamic from 2009 to 2011, when a hawkish RBA and a dovish Fed propelled the AUD/USD to historic highs, showing how powerful these macro trends can be.
In the near term, we must monitor Australia’s next monthly CPI indicator and the upcoming US Nonfarm Payrolls report for any change in this narrative. A surprisingly low Australian inflation number or a very strong US jobs report could challenge the current market consensus. Therefore, structuring trades with expiries beyond these key data releases will be crucial for navigating potential volatility.
